Who Will Pay for College?

By

Jeff D. Opdyke

Updated Aug. 17, 2008 11:59 p.m. ET

Who pays for college?

With our son in sixth grade and our little girl only 5 years old, Amy and I certainly have many years to contemplate that question. But if I've demonstrated any trait in this column through the years, it's that I'm constantly peering ahead, at future costs, so that Amy and I can prepare for what we know is coming.

Yet, while we're saving for that day, we're probably not saving enough. But that's by design. I think that instead of a free ride through college, a better gift to my kids is a mom and dad financially self-sufficient in their dotage.

But is that a fair approach? Should parents put their future needs above their kids'? Or, should we strive to save every possible dime we can for our kids' education on the theory that we're supposed to give them a head start to a better life than we have?

* * *

Wherever you fall on the spectrum of possible answers, the main point is that college costs torment many parents, given the competing financial demands we all face: pay for our lives today, save for our future, and fund our children's education.

Of course, like all parents, Amy and I fantasize about our children being so outstanding that schools will be clamoring to have them attend. They'll offer them scholarships because of their academic or athletic prowess, leaving us having to shell out just enough money so they can come home to visit often.

We don't see this as a total fantasy. A few years ago, in fact, we agreed that if our children do win scholarships, we would give them all the unused money we had saved for them, once they graduated. We recently told our son about the plan. Though he's clearly not savvy enough to understand the incentive at this age, he will eventually, and he'll see much to gain in striving for a scholarship.

In the meantime, though, he asked a question that indicates he's beginning to grasp the carrot we're dangling in front of him. How much money, he wanted to know, will be in the account?

Amy and I have been saving for each of our children since early in their lives. Based on the monthly amount we're saving and a modest rate of return, I would expect my son's account could reach about $19,000 by the time he hits college. That will be a nice bit of change for a kid coming out of college.

What if no scholarship is forthcoming, though? Will the savings cover his costs? In all likelihood, no. With so many variables -- tuition, books, fees, where he attends, where he lives -- it's hard to arrive at a ballpark figure for the total cost. But I fully expect the bills will go substantially higher, even at a state school.

So, given that I already expect a shortfall, should Amy and I strive harder to save even more?

Many parents I know say absolutely yes. They are putting away every last dime so that their kids never have to worry about how to pay for college. Amy and I happen to be some of those lucky ones: My dad paid my bills and her parents paid hers, and we both emerged from college debt-free.

Others I know say absolutely not. One friend, in fact, specifically wants his daughter to take out a student loan for part of her college costs so that in working to pay it off after graduation she is forced to learn budgeting. Moreover, he hopes, the strategy means she better appreciates the value of her education and the hard work that goes into affording it.

I come at it from a different angle -- one that some will probably say is selfish.

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When I look to the future, the biggest expense I see is the giant costs awaiting Amy and me in retirement. While our kids' college degrees are certainly important, our ability to pay for our life after work is more important. As such, we've opted to funnel a much larger amount of cash into retirement savings than into our kids' educational accounts.

Some will argue that we're short-changing our kids and thinking only of ourselves. I argue, instead, that we're ultimately helping our kids to a far greater degree than we would if we were paying the entire cost of their diploma. By ensuring that Amy and I have an adequate nest egg for our retirement, we're also making sure that our kids will never be in the position of having to help us financially. I can't imagine a more important gift to our kids than making sure we are never a financial burden on them.

I'm certain my kids will one day see that we made the right choice. It will mean they won't feel torn -- or guilty -- choosing between their own family's financial needs and Mom and Dad's utility bill. It means they won't face potential conflicts with a spouse frustrated that family dollars have to fund an in-law's life. As readers of this column know, this is a position I fear I will be in one day with my own mother.

Moreover, what's wrong with kids being responsible to some degree for their own education? If neither of our children win scholarships, they can still pursue grants. If that doesn't pan out, they can work to pay some of the costs. (Amy and I will pay some of those costs from our income stream at that time to help cover what the savings don't.)

As a last resort, our kids can always pursue student loans to cover what our educational savings and income don't. They'll have a lifetime in the work force to repay whatever they need to borrow.

At the end of the day, I say parents should pay for their kids' education -- but only after saving for their own future. After all, when you stop working one day, there's no one waiting to hand you a scholarship or grant to retire.

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